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THE PEOPLE, THE RAILROADS 
AND THE NATIONAL AUTHORITY 


ADDRESS 


HON. PHILANDER C. KNOX 


BEFORE THE 


LINCOLN CLUB 

KALAMAZOO, MICHIGAN, 
TUESDAY, FEBRUARY 11th, 1908 







A.V.K . 

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I 




THE PEOPLE, THE RAILROADS AND THE 
NATIONAL AUTHORITY. 


Mr. Toastmaster and Gentlemen: 


W HAT the great interstate railroads have 
demanded of the people through the Na¬ 
tional authority in the past, and what the people 
through the same authority are now demanding of 
them, constitute two distinct phases of American 
economic and legal policy which it is interesting at 
this time to contemplate; and from this contem¬ 
plation we may get our bearings upon some situa¬ 
tions not difficult to understand, but which have 
been much misunderstood. 

With the imagination of the American people 
captivated by the marvellous utility and potential¬ 
ity of the railroad as a means of inter-communica¬ 
tion and a factor in development, the first fifty 
years of railroad history constitute a period of 
generous and protecting governmental care. 

Created by the States and originally designed 
and operated almost wholly as local highways it 
was long after the American railways were well 



4 

established in the Eastern States before the con¬ 
flict began between the National and State authori¬ 
ties incident to the expansion of the railroads into 
interstate systems. 

In the meanwhile local governmental policies 
in respect to railroad properties and operations had 
been adopted and embodied in State Constitutions, 
laws and judicial decisions. The adjustment of 
these to the paramount Federal authority as it 
began to be invoked to protect the interstate com¬ 
merce of the country from the exercise of conflict¬ 
ing local laws and regulations constitutes the first 
epoch of our National policy, and it was marked 
by progressive liberality and even zeal in extend¬ 
ing Federal protection and encouragement. 

The States claimed and insisted upon a con¬ 
trol over business of railroads transacted within 
their borders unaffected by the fact that such busi¬ 
ness may have originated in or been destined for 
points in other States. 

In the earlier days the highest courts of the 
States sustained monopolies granted by the States 
to engage in transportation between the States and 
there was general acquiescence in the belief that 
the commercial power of the general government 
amounted to little as a limitation upon State 


5 

authority. So dominant and sacred was the idea 
of the rights of the States that the second Con¬ 
gress even disclaimed its authority to authorize 
stage coaches to carry mails between the States 
upon the ground of its being an unauthorized 
interference with the functions of the States. 

These local claims went for a long time un¬ 
challenged and all sorts of trammels and burdens 
were imposed upon interstate business. It was 
regulated, taxed and even prohibited in some cases. 

The rule of law which governed the situation 
for many years, as prescribed by the Supreme 
Court of the United States, was that so long as 
Congress remained silent and did not undertake 
the regulation of commerce under its constitutional 
authority the States were free to impose regula¬ 
tions. That was the theory of concurrent authority. 

The extent of the confusion growing out of 
this condition of affairs can scarcely be realized in 
this age of continuous and unbroken routes of 
travel and transportation. Passengers had to change 
cars at State lines and goods had to be reshipped. 
The privilege of going into, out of, or through 
States wastaxed and the right to do so was held 
not to conflict with the power of Congress over 
interstate commerce. 


6 


The railroads struggled for a time against these 
conditions in the Courts without avail and finally, 
backed by the people’s insistent demand for con¬ 
tinuous and expeditious transportation and taking 
advantage of a most extraordinary and unpopular 
assertion of local authority, a move was made 
upon Congress to assert its constitutional power 
and assure to every railroad in the United States 
the unhampered right to carry persons and prop¬ 
erty from one State to another and to connect 
with roads of other States so as to form continu¬ 
ous lines of transportation. 

At the present time the circumstances out of 
which this appeal to Congress was successfully 
made seem almost incredible. New Jersey had 
granted a charter to the Camden and Amboy Rail¬ 
road providing that during the life of the charter 
no other railroad should be constructed in the State 
to be used for the transportation of passengers and 
freight between Philadelphia and New York with¬ 
out the consent of the Camden and Amboy Com¬ 
pany, and taxing every passenger passing through 
the State between those cities. During the Civil 
War, the Government being under the necessity 
of moving troops from Philadelphia to New York 
and the Camden and Amboy Railroad not being 


7 

able to handle the traffic, the Government was 
compelled to impress another railroad into its serv¬ 
ice. Subsequently the Camden and Amboy Com¬ 
pany brought suit in a court of New Jersey and 
compelled the company which served the Govern¬ 
ment to pay to it every cent which it had received 
for this transportation. It was to destroy this mo¬ 
nopoly and to compel all States to permit the 
traffic of other States to pass through them that 
the act was passed. 

As soon as the bill was introduced it met with 
strong opposition, not only from New Jersey, but 
from many Senators and Representatives who 
claimed that the act was unconstitutional as inter¬ 
fering with the right of the State to regulate her 
own internal affairs. 

This bill was enacted into a law on June 15, 
1866, and it provides, as I have already stated, 
that railroads are authorized to carry persons and 
property from any State to another State and to 
form continuous lines of transportation. The act 
is a license to engage in interstate commerce with¬ 
out State interference, since carrying property from 
one State to another is interstate commerce, and it 
was passed under the power to regulate such 


commerce. 


8 


It was designed, as the Supreme Court said in 
construing the law, “ to remove trammels upon 
transportation between different States which had 
previously existed and to prevent the creation of 
such trammels in the future.” 

Proceeding with even more rapid pace, after 
the movement had begun, the Federal judicial au¬ 
thority supplemented the legislative branch of the 
Government in its effective work of establishing 
the supremacy of the National to the exclusion of 
the State authority over intercourse and the means 
of intercourse among the States. 

After undergoing various modifications, the rule 
was squarely reversed that the silence of Congress 
upon any phase of commercial intercourse left the 
States free to regulate it within their own territo¬ 
rial limits. The silence of Congress is now held 
to be equivalent to a legislative declaration that 
commerce between the States shall be free from 
State regulation. This rule proceeds upon the 
theory of exclusive Federal authority over the 
subject and effects by the mere force of its 
enunciation a total exclusion of the States from 
the field. 

Prentice and Egan, speaking of the subject of 
Federal authority over interstate commerce and the 


9 


contributions of the Federal judiciary to its upbuild¬ 
ing, say: 

“To the wide range of questions thus so 
early suggested, we find no answer in the 
express terms of the Constitution. Whether 
the commercial power which had been granted 
to Congress was to be exclusive of, or con¬ 
current with, State action; whether it was to 
be subordinate or superior to the police or 
revenue powers of the States; whether, in 
short, it was to be everything or nothing,— 
all this was undetermined. The Federal 
authority as it exists to-day is the work of 
the National judiciary, and the decisions of the 
Supreme Court which mark its extent and its 
limitations would alone be the enduring monu¬ 
ment of the greatness of the men who have 
sat upon the bench of that court, were their 
memory in all else gone.” 

The Federal activities to promote and protect 
National commerce have likewise extended to the 
Executive branch of the Government. President 
Cleveland’s intervention at Chicago in 1894 was 
based in part upon the interruption of commerce 
between the States. The executive claim was that 


IO 


the National power over interstate commerce in¬ 
cluded all the attributes of sovereignty, and that 
the President had power to forcibly remove all 
obstructions put upon the highways of commerce. 
That claim was sustained by the Supreme Court. 

Thus far I have endeavored to show that the 
interstate railroads of the country have been the 
wards and beneficiaries of the Federal Government; 
that from the beginning the State control over them 
has been progressively lessened and the National 
control progressively increased to the point where 
the last vestige of the local authority, except in 
matters comparatively unimportant and local in their 
bearings, has been swept away and the National 
power declared paramount and exclusive. And so 
far as this has been brought about, it has been ac¬ 
complished by legislation solicited by the railroads 
themselves and through judicial doctrines for which 
they contended and by executive action which they 
invoked. The people looked on and approved this 
rapid development of Federal control with a full 
realization of the fact that a single control was nec¬ 
essary for the highest efficiency in railroad service. 

The first problem, the development of the rela¬ 
tions of the highways of the Nation to public 
authority, was now solved and solved wisely. The 


11 


first epoch was concluded and out of the abuses 
and perversions of the augmented powers and 
privileges attending the enormous expansion of 
railroad operations under generous governmental 
policies sprang the necessity of regulating the rela¬ 
tions of the railroads to the people for whose serv¬ 
ice they were created. This may be characterized 
as the second epoch. If railroad managers had 
fully appreciated and respected their relations to 
their trust and the true relations of the highways 
of commerce to the people, there would have been 
no second epoch and no necessity for the regula¬ 
tive legislation which began in 1887 and will end 
only when justice and equality are fully established. 

As the railroads sought the Federal power for 
their protection, so the people resorted to the 
same power for their own relief. It began gradu¬ 
ally to dawn upon the American people that they 
were living substantially under railroad domination 
so far as their business interests were concerned. 

The agitation for railway legislation preceding 
the passage of the act of 1887 which created the 
Interstate Commerce Commission was caused by the 
flagrant disregard by the general officers of railroad 
companies of their obligations to the public and 
their duties to their security holders. 


12 


The general purpose of that law was to secure 
the equality of right between shippers and com¬ 
munities which had been so generally ignored. 
Favored individuals and localities had been enriched, 
and unfavored ones had been brought to poverty. 
Much relief was anticipated from this measure and, 
indeed, the grosser forms of discriminating favors 
were for a time apparently checked. 

While the Commission possessed power to seek 
and discover deviations from the law, it had no 
power to declare just rules of action or to enforce 
its decrees concerning unjust practices. Time and 
again, but in vain, did the Commission represent 
to Congress the defects in the law as a remedial 
measure for the abuses against which it was aimed, 
and time and again its recommendations were ig¬ 
nored. The unwillingness of Congress to remedy 
the law’s defects and the apparent disposition of the 
Courts strictly to construe its provisions practically 
nullified this legislation. 

In the year 1902, and for some time previous, 
railroad and other corporate abuses were flagrant 
and widespread and much confusion existed as to 
the state of the law concerning them. Grave 
doubts had been expressed by committees of Con¬ 
gress and other high authorities as to the power of 


13 

Congress under the Constitution to defeat new and 
subtle plans for bringing under a single control 
the great producing and transportation corporations 
of the country, and to reach the cunning devices 
employed to prefer one shipper over another. The 
organization of the Northern Securities Company 
to throttle railroad competition in the Northwest 
and the fact that the large beef packers and grain 
dealers in the middle west had entered into illegal 
arrangements with the railroads for rebates and 
discriminating advantages in transportation which 
gave them a complete monopoly of a business 
formerly enjoyed by a large number of persons 
distributed over the entire country, developed a 
situation in the early days of the Roosevelt 
Administration which required prompt action along 
new and untried lines. The first important act of 
the Administration affecting this subject was its 
declaration that the plenary power of Congress 
over all kinds of transportation and its instru¬ 
mentalities had not been exhausted by the Sherman 
Anti-Trust Law nor by the Interstate Commerce 
Act, and the announcement that steps would be 
taken at once to secure interpretations of all 
existing laws, with a view of confirming the theory 
of the completeness of the Federal power as ap- 


H 

plied to the situation and as a guide in considering 
the necessity for new legislation. 

Pursuing this policy the monopolies created by 
secret and preferential rates for railroad transporta¬ 
tion were successfully attacked in suits in equity 
to enjoin the violation of the law against rebates 
and discriminations, thereby establishing for the 
first time the right of the Attorney General to ap¬ 
pear in a court of equity in behalf of large num¬ 
bers of people and sections of the country affected 
by a violation of law. In these cases the great 
remedy of injunction was employed to enforce 
popular rights. The Government also succeeded 
in branding as outlaws the combinations of inde¬ 
pendent corporations to fix and maintain extor¬ 
tionate prices of meats, made possible through 
illegal arrangements with the railroads, and drove 
them, when confronted in court with overwhelming 
evidences of guilt, to fly to the protection of a de¬ 
murrer to prevent the revelation of the evidence 
that the Government had collected with unsparing 
pains to establish violations of the law. 

In the suggestions made by the Administration 
to Congress at its request respecting new legisla¬ 
tion it expressly disavowed the purpose of an¬ 
nouncing a complete scheme of governmental regu- 


IS 

lation of railroads and combinations, but made 
certain specific suggestions which it thought would 
greatly improve the situation. 

The specific recommendations were these: a 
practical and effective law to punish the persons 
receiving rebates as well as those paying them; a 
law to empower the Federal Courts to issue in¬ 
junctions at the suit of the Attorney General of the 
United States to prevent rebates; a law making it 
unlawful to transport traffic by carriers subject to 
the “act to regulate commerce” at any rate less 
than such carriers’ published rate; a law to enable 
the Government to get at all the facts bearing upon 
the organization and practices of concerns engaged 
in interstate and foreign commerce, and a law to 
secure speedy decisions of cases under the anti-trust 
and interstate commerce laws. 

Every one of these suggestions became law 
within sixty days after it was proposed. 

It would be difficult to overstate the enormous 
value of this legislation to the public. It did 
more to confirm the party of Abraham Lincoln in 
the affections and confidence of the people than 
any body of substantive law enacted since his 
death. It was highly commended by President 
Roosevelt in his message to the 58th Congress 


and in his public speeches during the year follow¬ 
ing its passage. It redeemed the promises of the 
Republican Party made in the Congressional cam¬ 
paign of 1902. Its efficiency has stood the test of 
time; its constitutionality has withstood the attacks 
of the most powerful interests represented by the 
most brilliant advocates, and finally it was popu¬ 
larly endorsed at the polls, and the spirit of mod¬ 
eration and justice in which it was conceived and 
enacted was approved by the splendid majorities 
of 1904 in a campaign in which it was advanced 
as the party’s chief claim to popular confidence. 

A though the sum of the achievements of the 
57th Congress was great in securing for the peo¬ 
ple rights so boldly denied, yet the full measure 
of relief had not been accorded. An analysis of 
the acts of that session and the remedial legis¬ 
lation that preceded it disclosed that they dealt 
effectively with but one phase of the popular 
demand, namely, the right to equality in service 
and equality of charge for service on the public 
highways. 

There yet remained two important matters to 
be dealt with, namely, such regulation of railroad 
rates as would give practical effect to the provis¬ 
ions of the law requiring them to be reasonable, 


i7 


and, finally, such regulation of commerce relative 
to the employees engaged therein as would secure 
to them more reasonable conditions of labor and 
minimize to them and to the public the dangers 
incident to transportation. These features were 
covered by the railroad rate law, the safety appli¬ 
ance law, the law limiting the number of hours 
railroad employees can be consecutively employed, 
and the employers’ liability act. The last men¬ 
tioned Act has recently been declared by the Su¬ 
preme Court to be unconstitutional as it was writ¬ 
ten, but its beneficent provisions are sure to be 
re-enacted upon valid and constitutional lines. 

The record of achievement in the public in¬ 
terest since 1887 has been very great and the re¬ 
sults accomplished during this administration form 
by far the most important part. A very complete, 
if not perfect system of commercial regulation has 
been established. Reasonableness and equality in 
railroad rates and practices are assured, railroad 
operations have been brought under rigid govern¬ 
mental supervision, and the safety of employees 
and the public protected by proper laws. 

This administration found a deficient and dis¬ 
credited body of law under which all sorts of 
commercial and social tyrannies boldly flourished, 


i8 

vitally affecting and undermining our National well 
being. When the record of its achievements is 
closed it will reveal a compact body of construct¬ 
ive, systematic and effective legislation remedying 
defects, supplying omissions and covering new 
phases in the field of National authority over inter¬ 
state intercourse and its instrumentalities. 

The fundamental work has been done. It has 
been wrought out by those responsible for it, on 
broad lines, in a spirit of moderation and with a 
desire to do no injustice. It has been neither 
“sporadic” nor “spectacular.” The work has been 
treated as a whole and each part sustains its proper 
relation to each other part. It has proceeded as a 
structure should, dealt with as a unit, not here 
and there a pillar with missing roof between. As 
the work progressed motives and measures have 
been perverted and misunderstood by those who 
could not or would not understand them. Unscru¬ 
pulous men, upon the one hand, have intemperately 
condemned every forward step, and, upon the other 
hand, men equally unscrupulous have endeavored 
to break down the credit and efficiency of the rail¬ 
roads, arrogating leadership in an economic devel¬ 
opment the scientific principles and practical details 
of which they altogether misunderstood. 


19 


Unfriendly criticism has portrayed these steps 
as bearing fruit only in the disturbance of busi¬ 
ness. To this the facts furnish a complete refuta¬ 
tion. The steady judicial assertion of exclusive 
National authority over the interstate traffic of the 
railroads, and the no less steady assertion of the 
legislative and executive branches that the author¬ 
ity shall be used to correct evils arising from lack 
of regulation, are not sporadic but constant, nor 
have the measures framed, matured and enacted 
by Congress inflicted injury upon or given just 
cause of complaint to legitimate interests. 

Halts and delays caused by judicial construc¬ 
tion or legislative correction of details found defec¬ 
tive may seem sporadic to superficial and possibly 
prejudiced observation. So the river, bending and 
doubling in its course, its current halted by dams 
and bars, may seem interrupted and obstructed in 
its flow. But the stream invariably flows on; and 
it never flows backward. 

No more can the progress accomplished be 
turned backward. The principles established are 
permanent. The policy of legislation; the subor¬ 
dination of corporate operations to it, the law of 
impartiality in rates and accountability to Federal 
authority for integrity and impartiality in the con- 


20 


duct of the great transportation services of the 
nation are now fixed and rooted in our jurispru¬ 
dence and legislation. Postulating only the ever- 
essential factor of fair, earnest, and faithful enforce¬ 
ment, we may rely on this body of legislation for 
adequate protection against the return of the evils 
which have evoked the reforms, without invoking 
acts of a vindictive and destructive nature. 

Nor is it true that the measures which have 
reached the matured form of National legislation 
include attack, enmity or injury to sound business 
interests, either corporate or private. Extreme 
propositions may have been made; but they have 
not largely prevailed in the completed enactments 
by Congress. On the contrary these laws, rightly 
seen, mean a sounder, stronger and more widely 
diffused prosperity for the real corporate interests, 
namely, the owners of the railroad shares and 
securities. 

High railroad authority has declared the neces¬ 
sity of spending five and a half billions during the 
next two years in extensions of the railroad facili¬ 
ties, to meet the growing demands of the country, 
coupled with a grave doubt whether the securities 
to pay for these expenditures can be floated. In 
view of that very doubt, though it is questioned 


21 


whether it is a subject within Federal authority, it 
is of the utmost importance that the five and 
a half billions of securities shall purchase the full 
five and a half billions’ worth of improvements, and 
not be subject to wholesale though surreptitious 
subtractions. Surely investors will buy bonds 
which represent ioo per cent, of their face in act¬ 
ual increase of the value of the property more 
readily than bonds which only enhance the secur¬ 
ity sixty, seventy or even eighty per cent, of the 
increase in liabilities. Surely stockholders will find 
more satisfaction in their property, if it is not bur¬ 
dened with charges to pay interest on 20 or 30 
per cent, of bogus indebtedness. Surely the great 
body of industry will be less provoked to enmity 
if their traffic is not called upon to pay fixed 
charges on that element of pure inflation. 

It is as much to the interest of the security 
holders that favoritism in rates and the fiat quality 
in capitalization shall be prevented, as it is to 
the interest of the public that railroad capital shall 
earn a fair return on actual and uninflated invest¬ 
ment. Railroad revenues cannot attain their broad¬ 
est and most stable dimensions when dwarfed and 
diverted by these abuses; nor can the wide in¬ 
crease of transportation facilities needed by growing 


22 


commerce be secured, unless it offers to the in¬ 
vestment of actual capital an adequate and reasona¬ 
bly assured return. Legislation conceived and ex¬ 
ecuted in the unchangeable resolution to maintain 
justice and honesty for and against all classes 
alike is beneficial for all alike, and establishes the 
foundation for the widest and most permanent 
National prosperity. 

This I maintain to be the spirit and character 
of the laws enacted by Congress, on this subject. 
Administered with unswerving fidelity to the under¬ 
lying purpose, they furnish the full remedy for the 
evils. We must not forget that the efficacy of all 
law lies in the integrity and persistence of its en¬ 
forcement. A diversion of public opinion into inat¬ 
tention or oblivion may easily be reflected in neg¬ 
ligent or partial enforcement. Against that, the only 
perceptible possibility of a mooted reaction, must 
be maintained an active and educated popular sen¬ 
timent, judging truly the depth and breadth of the 
interests at stake, resolved to avoid on one side 
the rocks of corporate privilege and favoritism with¬ 
out falling on the other side into the whirlpool of 
destructive and confiscatory retaliation. 

For the maintenance of that enlightened popular 
opinion, the co-operation of sincere and honest men, 


23 


laying aside private interest or personal prejudice 
for the common welfare, is invoked as the highest 
duty of patriotic citizenship. 

The last authoritative word upon the subject of 
the people, the railroads, and the national authority, 
comes from the Interstate Commerce Commission 
in its report for 1907. 

Speaking of the body of law now extant it 
says: 

“It means much for the present and more 
for the future that the principles of this law 
have gained greatly in general understanding 
and acceptance. By railway managers almost 
without exception the amended law has been 
accepted in good faith, and they exhibit for 
the most part a sincere and earnest disposi¬ 
tion to conform their methods to its require¬ 
ments. To a gratifying extent there has been 
readjustment of rates and correction of abuses 
by the carriers themselves. Methods and 
usages of one sort and another which oper¬ 
ated to individual advantage have been vol¬ 
untarily changed, and it is not too much to 
say that there is now a freedom from for¬ 
bidden discriminations which is actual and 
general to a degree never before approached.” 


24 


What I have said has been in the main of 
what has been accomplished under the National 
authority in the past. Further exercise of that 
authority should proceed with just appreciation of 
real public needs and dissociated from political 
clamor. We must remember, again quoting from 
the Interstate Commerce Commission, that: 

“If business undertakings proportionately 
increase during future years, the railroads of 
the country must add to their tracks, cars, 
and other facilities to an extent difficult to 
estimate. It may conservatively be stated that 
the inadequacy of transportation facilities is 
little less than alarming; that its continuation 
may place an arbitrary limit upon the future 
productivity of the land, and that the solution 
of the difficult financial and physical problems 
involved is worthy the most earnest thought 
and effort of all who believe in the full 
development of our country and the largest 
opportunity for its people.” 

The Commission makes it evident that the best 
and ablest railway managers now recognize the old 
evils and abuses and the necessity for uniform 
Federal regulation in the interest of the railroads 


25 


themselves, and that they show a disposition to co¬ 
operate willingly in the plans and methods adopted 
to secure conformity to the law. They seem now 
to realize that the railroads having invoked the 
Federal power to be freed from onerous State re¬ 
straints, they cannot now justly complain if the 
power which helped them also regulates them in 
the public interest. They must take the burden 
with the benefits. They sought liberty, and they 
must remember that liberty is not license but is a 
freedom regulated by law. 

There is nothing in present conditions requiring 
any strain upon our institutions to supply a rem¬ 
edy for any mischiefs that plague the public, and 
there are no mischiefs the correction of which may 
not be attained without disturbing the public wel¬ 
fare. There is enough Federal power, if not enough 
Federal legislation, to meet all Federal emergen¬ 
cies. There is nothing affecting the external affairs 
of the Nation or such internal ones as are commit¬ 
ted to its charge that Congress cannot regulate; 
there is nothing that affects them injuriously that 
Congress should not regulate, and there is nothing 
which does not belong to the Federal jurisdiction 
that Congress should attempt to regulate. 

Laws enacted under the public authority in a 


26 


spirit of wisdom and toleration, enforced impar¬ 
tially, promptly and fearlessly, repealed when 
found unsuited to conditions or to be oppressive 
will not only mark us as a people progressing in 
the art of self-government, but will reduce to a 
minimum any conflict between the people and the 
railroads between whom there should be the peace 
that will enable the one to receive and the other 
to render a service that “ measures the profitable 
production of this vast country.” 


















































































































































































































































































































































































































































































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